Brussels investigates UK support for Lynemouth conversion to biomass

European Commission has raised concerns that subsidising imported biomass could distort market

RWE’s plans to convert Lynemouth power station in Northumberland to run on biomass pellets could be thrown into doubt after the European Commission confirmed it would investigate the government’s financial support for the 450MW scheme.

Lynemouth was one of eight renewable energy projects to win support through an early round of the government’s Contract for Difference (CfD) scheme last year.

The £100m conversion would allow Lynemouth to remain open given that without significant investment it would face closure under emissions regulations.

However, the EU Commission said it was concerned the scheme could receive more money than is required to convert the plant and could lead to overcompensation.

In a statement, the EU Commission said it suspected RWE has underestimated the rate of return from the investment, and as a result it could receive more support from its CfD than required.

The EU Commission also raised concerns the plant would be importing 1.5 million tonnes of wood pellets from North America and Russia, and subsidising these could distort competition in the biomass market.

“It will also assess whether the positive effects of the project in achieving EU energy and environmental objectives outweigh potential competition distortions in the market for biomass,” the statement added.

The Department for Energy and Climate Change (DECC) however, downplayed the impact of the investigation, arguing it was a normal part of the Commission’s process.

“We will continue to work together to help resolve its concerns,” she said.

“Biomass is an important transitional and cost-effective renewable technology.”

The investigation comes after the government’s Competition and Markets Authority (CMA) raised fresh concerns that the early CfD round has already used up half of the allocated CfD budget through a non-competitive tender round.

However, RWE said it was disappointed by the news, which could further delay the scheme, noting that it has been waiting for a decision from the Commission since June 2014.